According to a press release dated October 14, 2008, the Bank holding company WSB Financial Group Inc said it agreed to settle a securities class action lawsuit for about $4.9 million. The settlement agreement provides for the certification of a class consisting of all persons who purchased the company's common stock pursuant or traceable to its initial public offering completed in December 2006. The insurance policy of the company's officials will contribute about $4.45 million towards the settlement, and had previously contributed about $350,000 towards the company's legal fees. WSB Financial said the agreement contains no admission of fault or wrongdoing by the company or the other defendants.
As summarized by the civil court docket, on November 19, 2007, an order regarding initial disclosures, joint status report and early settlement was entered. A stipulation and proposed order in regards to the consolidation and scheduling by parties was entered on November 29, 2007. On December 31, 2007, a motion to appoint lead plaintiff and the selection of lead counsel was filed. On January 02, 2008, a motion to consolidate cases was entered. Lastly, an order consolidating cases and appointing lead plaintiff and lead counsel was entered on March 10, 2008. On March 25, 2008, a stipulation and proposed order in regards to the defendants’ schedule for filing consolidated complaint and the briefing of motion to dismiss by parties was entered. Just as quickly, a minute order was entered on April 11, 2008 by Judge Richard A. Jones and deadlines were set for the plaintiffs to file their consolidated complaint and the defendants’ filing of motion to dismiss. At the same time, an amended complaint was also filed. However, on May 09, 2008, a motion to dismiss the consolidated class action complaint was filed by the defendants. Judge Jones entered an order to renote the motion to dismiss on June 20, 2008. Lastly, an order granting an agreed motion to continue and to renote the pending motions to dismiss was entered on August 27, 2008.
The original class action lawsuit was filed on behalf of purchasers of the securities of WSB Financial, Inc. after the company initial public offering seeking to pursue remedies under the 1933 Act. The class action on behalf of all persons who purchased WSB shares, issued pursuant to the December 2006 Registration Statement and Prospectus. WSB is the holding company for Westsound Bank, a Bremerton, Wash.-based financial institution that serves the Puget Sound area.
Specifically, the complaint charges WSB, certain of its officers and directors, and the Company's underwriter with violations of the Act. According to the complaint, the company's registration statement for the IPO failed to disclose that the company had been violating certain banking laws and regulations relating to the origination, administration and monitoring of construction and mortgage loans. Due to the company's misleading statements the WSB stock was traded as high as $21 per share during the class period.
The complaint further alleges that beginning in September of 2007 a series of announcements and investigations into the company's lending practices caused the WSB stock to plummet. In late September the company announced that due to the reduced demand of mortgage loans in the market 33 jobs would be eliminated in the mortgage division of the company and, that WSB's executive vice president of sales and lending at Westsound Bank was terminated. As a result stock price fell from $15.30 to $12.40. In a final blow, the company announced that state and federal regulators were looking into possible fraud and misconduct in its real estate lending practices. Within two days of this announcement the company's stock dropped nearly 60 percent, from $11.20 on October 24, 2007 to $4.73 on October 25, 2007.
On November 21, 2008, an Order Preliminarily Approving Settlement And Providing For Notice was entered with the court.
On March 27, 2009, an Order Approving Plan Of Allocation, an Order Awarding Attorneys’ Fees And Reimbursement Of Expenses, and a Final Judgment And Order Of Dismissal were granted by the court.